Charitable Remainder Trusts

Definition

A Charitable Remainder Trust normally is used as a strategy for
converting highly appreciated assets into income producing assets,
without income tax liability. The Charitable Remainder Trust
is an irrevocable trust with both charitable and non-charitable
beneficiaries.

The donor transfers highly appreciated assets into the
trust and retains an income interest. Upon expiration of the income
interest, the remainder in the trust passes to a qualified charity
of the donor’s choice.

If properly structured, the CRT permits the donor to receive income,
estate, and/or gift tax advantages. These advantages often provide
for a much greater income stream to the income beneficiary than
would be available outside the trust.

Unitrust vs. Annuity Trust

There are two types of CRT the Unitrust and the Annuity
Trust. The main difference between the two is the way your
annual income, paid to you by the trust, is calculated.

Under the provisions of a Unitrust, the annual payment to
you must be a fixed percentage of the market value of a trust's
assets as determined each year or, alternatively, the lesser of 5
percent of such value or the trust's income. You can see that
there are no guarantees of the specific amount you will
receive. Your payments will depend upon the changing values of
the trust property or income from year to year.

Using an Annuity trust, the trust specifies an annual
amount to be paid to you. This guarantees that you will
receive a specific amount which you can depend upon every year.

Charitable Remainder Trust – Potential Benefits

Eliminate Capital Gains Tax

Tax deductible transfers to trust

Trust income can be significantly greater than income
generated outside trust

You choose duration of income from trust

Increased retirement income

Eliminate estate tax on trust assets

Preserve estate for family & heirs through survivorship
policy funded with added income

Provide charitable bequests to the causes of your choice

Those Who Would Benefit Most From a CRT May Have Some of the
Following Characteristics

Own highly appreciated assets

Would like to reposition such assets

Are in a high income tax bracket

Are subject to estate tax at death

Have philanthropic desires

Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice.